Brazil: Economy Expected to Return After Difficult Year

Foreign investments into Latin America, particularly as they relate to natural resources and utilities have increased. An example would be recent gains and larger holdings acquired by China across the region. This, in turn, impacts the oil and gas, mining and energy sectors in the region. Informal employment remains more common in the South American countries, which has resulted in compliance challenges with regards to local labor classification. For example, Colombia currently requires parity for informal workers. While Uruguay, Panama, Brazil, and Mexico have all established retirement subsidies, outside of pensions, for informal workers.

Brazil’s labor laws continue to restrict employer flexibility with regards to employee and contractor engagements, particularly where off-boarding and downsizing are concerned. A lack of automation in manufacturing growth has resulted in noticeable decline, as employers have shifted production to nearby markets, where added efficiencies could be gained in the production cycles. Although the cost of doing business in Brazil remains over five times lower than the regional average.

In the energies and utilities sector local hiring is expected to rise in conjunction with opportunities regarding imported equipment and services required for the floating production, storage and offloading facilities. Though not widespread across the industry, this movement is likely to impact hiring availability due to contracting constraints. Also, the recently signed bi-lateral agreement with China is likely to drive job growth across the mining sector.

The economy as a whole will suffer due to weak investments and reduced government spending. Declining private investments and business confidence – which fell to their lowest levels in nearly five years last May – contribute to a bleak economic climate overall. While the GDP is likely to contract this year, it is expected to return to moderate growth early next year.